Let’s face it! If you are looking forward to retiring, there are so many things you’ll need to consider. Two significant things that bugs most seniors are their finances and their lifestyle.
When the question of lifestyle comes into play, you have to consider whether to downsize for retirement or age in place. However, is it better to downsize for retirement or not?
As a financial expert, I’ve helped many seniors navigate this complex topic, which can be difficult to understand. If you’re on the brink of making this important decision, you might want to read this article until the end.
Let’s get started!
Should You Downsize for Retirement? The Answer
Downsizing is when an individual purchases a smaller home or property than the one they currently have. For instance, a retiree could consider moving from a five-bedroom house to a two-bedroom home.
So, should all retirees downsize?
Whether you should downsize or age in place is a decision you make after considering various factors such as your financial goals, health needs, and lifestyle preferences.
For some, the decision can favor them since it suits their budget and lifestyle preferences, while for others, downsizing can come with significant challenges that we will discuss in this article.
Why Do Retirees Downsize?
According to a study by Today’s Wills & Probate, researchers discovered that 23% of people about to retire consider downsizing.
But why?
Normally, retirees downsize for different reasons. These include:
1, Financial Reasons
Although some retirees may have a way to earn money, they might want to save some money on costs in the long run. If you live in a bigger home, the amount you spend on utilities such as electricity and water bills might be higher than if you live in a smaller home.
Downsizing would be a good idea if you’re looking to spend less on property taxes, second home insurance premiums, and mortgages and save more money.
2. Reducing Maintenance Responsibilities
Maintaining a substantial 5-bedroomed home can be pretty tricky when you age, and you don’t have enough help like it used to be when you were younger. You must clean all the rooms, handle all repairs, and manage the large yard. Plus, there’s a lot of unused rooms.
You can move into a small home to simplify the responsibility of managing your home. This will ensure that the senior has more time to see his or her grandchildren, travel, and pursue hobbies.
3. Physical Limitations
In addition to the difficulty of managing a big home, physical limitations could also be a factor in downsizing. These could include problems climbing up the stairs, being too far away from family, or having health challenges.
Downsizing or moving to a senior-friendly community can be an excellent solution to the problem since care becomes affordable to their seniors.
Why You Shouldn’t Downsize as a Senior
Financial experts say downsizing can only be effective if the senior does it wisely. There are situations that don’t favor downsizing.
Here’s a good example:
To downsize, you have to sell your current home. However, as you plan to do that, you realize that the market is not as good. You might get a low price for your home if you sell it now.
In this case, not downsizing would be the best option since the money you get might need more to make a down payment for the home you are about to buy or even be enough for upkeep. Remember, you have to deduct all the costs of selling a property from what you earn from the sale. These include:
- Moving costs
- Taxes
- Real estate fees
Other reasons why a retiree should avoid downsizing:
- If you have an emotional attachment to your home, downsizing might not be a good idea
- Seniors with serious health challenges may have a difficult time adapting to new environments
- If moving means you have to lose your support network and move further away from your family
- If you host family gatherings at your home, selling your current home to move to a smaller home may not be the best decision
What Other Downsizing Alternatives Should You Explore?
If downsizing is not suitable for you, what other alternatives should a senior consider? Here are a few viable options:
1. Living in Assisted Communities
The senior can move into a facility offering private living spaces, such as an apartment. Such places create a supportive environment, provide care packages, and remove the need for home maintenance.
2. Reverse Mortgage
Otherwise known as refinancing, a reverse mortgage is a type of loan in which the senior gets a monthly paycheck from the remaining equity in their home. It can be a good source of income and offer some form of flexibility while removing the need to move out of their home.
3. Renting Out a Part of Your Home
If you have a considerable home with unused areas or rooms, renting out these spaces will ensure you get some monthly income. This will reduce the strain of having to clean and maintain the room for the senior.
4. Aging in Place
Aging in place is when the senior remains in their current home but ensures that the home remains compatible with their needs by installing various safety features. These include grab stairs, stair lifts, or converting rooms for single-floor living.
Final Action: So Should You Downsize or Not?
That’s it for now. As you can see, whether a retiree should downsize or not depends on the senior's specific needs. If the current home still meets all your needs, is easy to maintain, or is affordable, then there’s no need to move out to a smaller space.